Saxo Bank receives a BBB investment grade rating from S&P

Danish-based broker Saxo Bank has received a coveted BBB credit rating from S&P. The bank which can trace its roots back more than 25 years, is also on the cusp of being recognised as a Systematically Important Financial Institution, or SIFI, in its home state, by the Danish Financial Supervisory Authority, the FSA.

S&P BBB Saxo Rating

Rating agency S&P has given Saxo an investment grade rating of BBB. The rating is a measure of a business’s financial strength and creditworthiness and acts as a guide for investors, who may be considering lending money to or investing in that entity.

• Related guide: How to invest in the S&P 500 from the UK.

A designation of triple B means that a firm’s finances are adequate in relation to its commitments, BBB is the lowest rating at which a company’s bonds could be considered investment grade.

Firms with an investment grade categorisation are typically able to raise money at lower rates of interest and from a wider catchment of investors. Who can be more confident about receiving annual coupons and repayment of the principal on the maturity of a bond, from an investment grade borrower.

The investment grade rating from S&P is also notable as the bank’s first public credit rating.

Søren Kyhl, who serves as Saxo’s Deputy CEO  and its Chief Of Operations was quoted as saying:

“We are pleased to receive a BBB rating with a positive outlook from S&P Global Ratings, which highlights our strong capital position and business model, cautious approach to risk management and ambitious growth strategy.

And:

We are also excited about the prospect of becoming a SIFI later this year. In combination, this is a testament to our commitment to providing top-quality platforms, products and services to our growing number of retail clients and institutional partners.”

Systematically Important Financial Institutions

Systematically Important Financial Institutions are organisations, such as banks and insurance companies that are deemed “too big to fail”.

They are businesses that are intrinsic to the financial system in a home state, or in some cases on a global basis.

By becoming recognised as a SIFI in Denmark Saxo will join an elite group of institutions that currently consists of Danske Bank, Nykredit Realkredit, Nordea Kredit, Jyske Bank, Sydbank and DLR Kredit.

Denmark’s economy isn’t the largest, with a GDP equivalent to $398 billion in 2021. However, the fact that Saxo’s business is considered to be significant in that context says a lot about how far the broker has come in the last twenty-five years.

Whilst becoming a SIFI is a badge of success it also means that the firm will be subject to enhanced regulatory oversight and stricter liquidity requirements, which are designed to safeguard its financial stability.